Claim Double Taxation Relief in Absence of DTAA?

Imagine a scenario whereby you own a residential property in an overseas u. s . that you have rented out. The condominium profits that you earn on the property will be taxable in such us a due to source-based taxation. But considering the fact that you are a resident in India, your condominium income will be taxable in India also. This is because as per the domestic tax legal guidelines of India a resident is taxed on his world income irrespective of the place it is earned. Thus, you will cease paying tax twice on equal income. This situation is termed “Double Taxation”.

How to Claim Double Taxation Relief in Absence of DTAA?

To grant relief to the taxpayers from such double taxation India has entered into double tax avoidance agreements (DTAAs) with many countries. Section 90 of the Income Tax Act, 1961 empowers the Central Government to enter into such agreements.

In this article, we are going to talk about how a double taxation remedy can be availed if the supply USA (i.e. u . s . in which your origin of income is located) doesn’t have a DTAA with India. Section 91 of the Income Tax Act, 1961 guides how an Indian resident can declare double taxation relief when the country in which tax is paid doesn’t have a DTAA with India.

Conditions for Claiming Relief

A resident can claim relief with the aid of way of overseas tax credit below area 91 in case the following conditions are fulfilled.

  • The resident has earned an income from a supply positioned outdoor India.
  • Such income is now not deemed to accrue or arise in India.
  • The tax has been paid on such earnings by the resident in that different country. The tax can either be paid with the aid of way of tax withholding or otherwise.
  • Such any other country doesn’t have a DTAA with India.


  • How to Claim Double Taxation Relief in Absence of DTAA?

How to Calculate Relief

An eligible resident is allowed a deduction from the Income Tax payable with the aid of him on his Total Income in India and such deduction is calculated with the aid of multiplying lower of the under tax fees by means of the doubly taxed income:

  • Indian rate of tax to be calculated as a share by way of dividing the tax on whole earnings in India via the Total Income in India. The whole earnings shall be computed after including the foreign earnings and considering the reliefs and deductions (such as Chapter VI-A deductions, set-off of losses) that are on hand below the Income Tax Act without relief accessible underneath this section.
  • Rate of tax of the foreign country to be calculated with the aid of dividing the tax paid in the foreign us of a by using the Total Income assessed in such a country.

In case the tax rate quotes of both international locations come out to be equal, the Indian tax fee shall be taken into account.

For understanding the procedural aspects relating to claims of foreign tax credit visit FINAXIS